Workplace Pension Reform

Steve Webb Excerpts

Tuesday 9th July 2013 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

I am pleased to announce that later today the Government will publish their response to the call for evidence on the impact of the annual contribution limit and transfer restrictions on the National Employment Savings Trust (NEST).

Automatic enrolment into workplace pensions represents a step change in the pensions landscape. A crucial part of the automatic enrolment landscape is NEST which was set up by Government to ensure all employers have access to a high-quality, low-cost option for workplace pension provision. While the market has always provided for larger firms and higher earners, NEST was created specifically to ensure that smaller firms and low to moderate earners also have access to quality pension provision.

To ensure that NEST focused on this “target market” the previous Government legislated to constrain NEST in two particular ways—an annual contribution limit, currently £4,500 a year, and restrictions on transfers in and out of NEST, which prevents bulk transfers of existing schemes and limits transfers by individual scheme members.

In summer 2010 the Department for Work and Pensions commissioned an independent review—“Making automatic enrolment work”—to consider whether the framework for automatic enrolment was fit for purpose. The review concluded that the basic architecture, including NEST, was appropriate, but that the constraints on NEST should be lifted in 2017.

More recently the Work and Pensions Select Committee recommended in 2012 that the constraints should be lifted at once, expressing concern that some firms might not be able to use NEST, resulting in consumer detriment. Government responded in late 2012 with their call for evidence to seek views on the future of the NEST constraints.

Requiring NEST to focus on this target market has been very successful. As a large number of medium and smaller firms will start enrolling their workers in the next few years, now is the time to focus on helping these firms get ready. With its special focus on those workers with lower earnings, NEST will be a key part of the solution as it has thought hard about its design; it has aimed its research, communications, use of language, investment and decumulation strategies at its target market. It is working, and we need this to continue. Therefore, to make sure we achieve our aim of getting people saving, we have decided that NEST must continue to focus on its target group without any distractions.

The responses to the call for evidence revealed a perception that the restrictions placed on NEST prevent it from serving the low to moderate earners and smaller employers it was intended for. The reality is quite the opposite. With mandatory contributions of just 2% on a band of earnings, with at least 1% from firms, no employer contributing at this level or the full 8% will exceed the annual contribution limit.

However, we need to look to the future and ensure NEST remains influential in the marketplace, by continuing to help drive up standards and best practice. The minimum contribution will rise to a combined contribution of 5% from October 2017 and 8% from October 2018. Therefore, in line with the recommendations of the independent “Making automatic enrolment work” review, I intend to legislate as soon as parliamentary time allows to lift the contribution limit from 2017. This will give employers the certainty they need that NEST will continue to be an appropriate scheme for them and their workers when minimum contributions rise, or should they choose to contribute more.

With regard to individual transfers, we agree that NEST should be part of the automatic transfer solution for which we are currently legislating. Therefore we intend to lift the restrictions on individual transfers in and out of NEST to coincide with the start of the “pot-follows-member” regime. The ban on bulk transfers will remain in place until the end of the main roll out period for automatic enrolment in April 2017, when it will then be lifted.

We believe that the creation of NEST has played a crucial role in the early success of automatic enrolment. NEST has focused on its target market and has innovated to serve the needs of those in that market. As automatic enrolment moves on to cover medium and smaller firms we want NEST to continue its excellent work, while signalling now that beyond 2017 NEST will be put on a similar footing to other providers in the wider pensions market.

The Government response document will be available on the gov.uk website later today (https://www.gov.uk/government/publications), and I shall place copies in the Libraries of both Houses.

Workplace Defined-contribution Pension Schemes

Steve Webb Excerpts

Thursday 4th July 2013 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

I am pleased to announce that today the Government will publish a call for evidence into quality standards in workplace defined-contribution pension schemes.

Automatic enrolment will lead to 6 million to 9 million people newly saving or saving more, primarily in defined-contribution pension schemes. Coupled with the introduction of a system of automatic transfers between workplace pension schemes, it is more important than ever that workplace pensions deliver a good experience for all their members.

While most schemes offer a good deal to savers, I am concerned there may be some—now or in the future—that do not deliver the standards that should be expected. Unlike other financial products, people who are automatically enrolled or automatically transferred into a workplace pension will not have made an active choice about which scheme to join. In addition, the long-term nature of pensions means it may not be clear how good an outcome a scheme will deliver for members until they have paid into it for many years. It is therefore particularly important that sufficient protections are in place to ensure that schemes are run in a way that is beneficial for members. The Government want to ensure that every defined-contribution scheme used for workplace saving delivers value for money and meets some essential minimum legislative standards.

Charges are one important aspect of this. On 1 July I laid draft regulations to prevent the use of consultancy charges in automatic enrolment schemes. The Government also plan to publish a consultation on charges this autumn, following the Office of Fair Trading’s investigation into the workplace defined-contribution pensions market. This consultation will set out proposals on charges, including for introducing a charge cap.

The Pensions Bill currently before Parliament includes provision to specify minimum legislative standards for workplace money-purchase schemes, as part of the Government’s proposed system of automatic transfers. Responses to the call for evidence will form an important part of the development of a set of minimum standards that all such schemes will have to meet. In particular, we are seeking evidence and views on scheme governance, default strategies, administration and record keeping, and scale as these are the areas we are considering for minimum legislative standards.

I will place a copy of the call for evidence in the Libraries of both Houses. The call for evidence will also be available on the gov.uk website later today at the following address: https://www.gov.uk/government/ publications.

Oral Answers to Questions

Steve Webb Excerpts

Monday 1st July 2013 Commons Chamber

[Mark Pawsey (Rugby) (Con)]

2. What assessment he has made of the use of electronic correspondence by the Child Support Agency.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

For the 1993 and 2003 child maintenance schemes, the preferred method of contact is by telephone—simply because of the sensitive nature of the material, which would otherwise have to be e-mailed. However, the ability to provide electronic communication is being embedded into the design of the 2012 scheme.

[Mark Pawsey]

I was very surprised when my constituent, Louise Cawser, was told by the agency that she could not deal with it by e-mail, because there was no effective tool to provide sufficient security. Given the drive across government as a whole and in various agencies to consult electronically, will the Minister provide some reassurance to clients of the Child Support Agency about how this will develop in the future?

[Steve Webb]

Yes, I am pleased to say that, starting later this year, clients on the 2012 system will have the equivalent of internet banking, so they will be able to log on, see their account and report changes of circumstances. We will close all existing cases over the next few years, and those who want to remain in the statutory system will move on to the 2012 system and they will have that service available to them.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

3. What assessment he has made of the most recent data on the performance of the Work programme.

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[Naomi Long (Belfast East) (Alliance)]

5. How many people who worked in Northern Ireland and paid national insurance contributions while aged 14 or 15 between 1947 and 1957, which did not count towards their qualifying years for a full basic state pension, fall two years or less short of the years needed to qualify for such a pension.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

As the hon. Lady will be aware, state pensions in Northern Ireland are the responsibility of Ministers in the Northern Ireland Executive. Her Majesty’s Revenue and Customs is responsible for national insurance matters. However, I am advised by HMRC that the information that she has requested could be obtained only at disproportionate cost.

[Naomi Long]

I thank the Minister for his answer, but some of the people who worked during that period, before the school leaving age changed in Northern Ireland, would be resident in other parts of the UK as well as in Northern Ireland. Therefore, will he undertake at least to raise the matter again with HMRC, in order that it can reconsider its response?

[Steve Webb]

The issue for HMRC is that the records that the hon. Lady is talking about—those of people who left school at 14 and 15 in the 1940s and 1950s—are on pieces of cardboard in a cupboard somewhere. That information could only be gathered at disproportionate cost.

[Sir Tony Baldry (Banbury) (Con)]

Does not this question demonstrate the fact that the concept of national insurance has always been a bit of a con in that it is not, and never has been, an insurance scheme? Essentially, those who are in work at any time are paying, out of their taxed income, for the pensions of pensioners of that time, on the understanding that when they reach pensionable age those in work will pay their pensions. Ever since it was introduced, the phrase, “national insurance”, has been misleading.

[Mr Speaker]

I am sure the reply will be shorter than the treatise.

[Steve Webb]

My hon. Friend is correct: it is an intergenerational pension promise, although we hold to the notion that we pay bigger pensions to those who have made more years of contributions. Therefore, we believe that there is an insurance element to the scheme.

[Graham Jones (Hyndburn) (Lab)]

6. What assessment he has made of eligibility for the state pension following the rise in contributions to 35 years from 2016.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

In the long term around 85% of people will get the full single-tier pension under the Government’s proposals.

[Graham Jones]

Does the Minister accept that as a result of the changes fewer people overall will qualify for the state pension by 2020? Does he agree that that is particularly unfair to people who, being so close to retirement, will not have time to make up the years?

[Steve Webb]

We have put in place special provision for the very people to whom the hon. Gentleman refers. When we value their pension rights at 2016, we will do so under the current rules, where 30 years are needed to qualify, and the new rules, where 35 years are needed, and we will use whichever of the two provides the highest number. The 2016 calculation will take whichever set of rules treats people most favourably and they will build upon that.

[Mr Julian Brazier (Canterbury) (Con)]

Does my hon. Friend accept that the proposed arrangements will greatly reduce means-testing in the long run and so restore incentives for people to save?

[Steve Webb]

My hon. Friend is right. The danger with the current system is that people who save find that the Government come along and say, “You’ve saved some money—we’ll take some money off you.” Our intention is to encourage, not penalise, saving. Paying a single, simple, decent pension just above the level of the basic means test will greatly enhance those incentives.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

The Government’s case for the new state pension is that it will increase the incentive to save in private pensions, but does the Minister agree with his hon. Friend the Member for Warrington South (David Mowat), a Treasury Parliamentary Private Secretary? He told the House during Second Reading of the Pensions Bill:

“One reason that people are not saving is that there is massive distrust of the industry. I have many colleagues in the private sector who would almost cut their arms off than invest in the pensions market.—[Official Report, 17 June 2013; Vol. 564, c. 712.]

What will the Minister to encourage people to make those savings in private pensions?

[Steve Webb]

I agree with the hon. Gentleman to the extent that there is mistrust of private pensions, which is why we have taken strong action,: for example, we have banned consultancy charges, which were a source of concern. On savings incentives, if he looks at our analysis, he will find that low earners in particular will have much smaller withdrawal rates when they save. Therefore, the return on savings, particularly for low earners, about whom I am sure he is most concerned, will be enhanced by the proposals.

[Charlie Elphicke (Dover) (Con)]

Does the Minister anticipate making pensions the subject of a cap at any stage?

[Steve Webb]

I think my hon. Friend might be referring to the idea of a total welfare cap, and while the Chancellor of the Exchequer has explicitly ruled out the idea of capping state pensions, I understand there are others in this House who are prepared to cap state pensions.

[Richard Fuller (Bedford) (Con)]

7. What assessment he has made of the performance of the Work programme in helping young people into work.

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[Dan Jarvis (Barnsley Central) (Lab)]

T7. The pensions Minister knows that I have been in regular contact with the Pensions Regulator regarding the Carrington Wire pension fund. He also knows that I am grateful for his support in addressing concerns about the ability of some foreign-based multinational companies to renege on their pensions responsibilities to UK pension holders. What progress are the Government making on addressing that important issue?

[The Minister of State, Department for Work and Pensions (Steve Webb)]

I am grateful to the hon. Gentleman and pay tribute to his assiduous work on behalf of his constituents in that case. I hope that this afternoon he was able to have a telephone conversation with the Pensions Regulator to discuss it. In general terms, the Pensions Regulator has powers to act overseas, as in the 2007 Sea Containers case and the 2011 Great Lakes case. I am happy to continue working with the hon. Gentleman on the issue.

[Stephen Phillips (Sleaford and North Hykeham) (Con)]

T8. What steps is the Department taking to support those who have worked for one company for most of their lives and whose pensions have now gone into the pension protection fund?

[Steve Webb]

I am pleased to announce that we recognised that the cap in the pension protection fund on those who are early-retired was affecting people particularly adversely if they had long service. We will be tabling amendments to the Pensions Bill so that those who have long service of more than 20 years with a firm will get an enhanced level of protection.

[Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)]

T9. The number of people accessing emergency food aid from Liverpool’s central food bank in my constituency has jumped by 70% over the past year. The chief cause of this is delays in them receiving their social security support. What assessment has the Secretary of State made of how many more people will be forced to turn to food banks and payday lenders by his Government’s proposal to extend the wait for jobseeker’s allowance?

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[Ms Karen Buck (Westminster North) (Lab)]

In 2011 Lord Freud told peers that in theory his housing benefit policy would cause rents to fall, that it is a matter of market forces, and that it was irresponsible to suggest that thousands of people would be made homeless as a result. In fact, rents have soared, most new claims for housing benefit are from working families, and in London there has been a 91% increase in homelessness applications from people losing their private sector tenancies. How is that theory going?

[Steve Webb]

The hon. Lady refers to soaring rents, but I hope she accepts the evidence from the Office for National Statistics, which last week published figures for rents in London in the private rented sector that showed an increase of 2.2% below the rate of inflation.

[Duncan Hames (Chippenham) (LD)]

A constituent of mine on jobseeker’s allowance who is actively seeking work was recently made to give up some of the volunteering he was doing. What good is an arbitrary 16-hour-a-week limit on volunteering by JSA recipients when what really matters is that they do whatever is best to increase their chances of getting a job?

[Mr William Bain (Glasgow North East) (Lab)]

The bedroom tax is causing councils enormous financial strain, as it is for hundreds of thousands of vulnerable people across the country. On 11 June the pensions Minister told me that the Government are not making monthly checks on how much discretionary housing payment money councils are spending. What will happen to hundreds of thousands of vulnerable people when the money runs out?

[Steve Webb]

I am glad that the hon. Gentleman mentions the support we give to local authorities through discretionary housing payments. We constantly hear that it is not enough, so he may be startled to learn that in the year just ended, 2012-13, over 300 local authorities in England, Scotland and Wales sent us back money totalling over £11 million because they could not spend it.

[Graham Evans (Weaver Vale) (Con)]

In the interests of time, Mr Speaker, I should say that I was about to ask that question.

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[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

The pensions Minister’s answer a couple of minutes ago on discretionary housing payments was quite frankly absurd, because he knows full well that the bedroom tax was not in operation in the last financial year.

To return to the question of impact, local authorities throughout the country, including my own, now find that arrears are going up because people cannot afford the bedroom tax that is being imposed on them. What does the Minister expect local authorities to do about this, because it is affecting their overall budgets as well?

[Steve Webb]

Just to be clear, when we made reductions in housing benefit for 2012-13 we were told that the support was not enough, but the hon. Gentleman’s local authority, Edinburgh, returned to us £162,000 of help that it could not spend. We have increased the support to Edinburgh council this year compared with last year.

[Mr David Ruffley (Bury St Edmunds) (Con)]

Benefit tourism can be deterred if greater conditionality is introduced into the UK benefit system. Will the Secretary of State tell us whether or not our European partners will allow us to do that?

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[Alison Seabeck (Plymouth, Moor View) (Lab)]

Have Ministers had any discussions with the Housing Minister about the benefits of switching funding from escalating housing benefit expenditure to new, affordable house building?

[Steve Webb]

The hon. Lady will have heard in the comprehensive spending review announcement that the Government are committed to a £3 billion investment in building affordable housing. This is a priority for this Government and we agree entirely that previous Governments left far too few affordable houses.

[Mr Speaker]

Last but not least, I call Oliver Colvile.

Pensions Charges

Steve Webb Excerpts

Monday 1st July 2013 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

I am pleased to announce that later today we intend to lay draft regulations to prevent the use of consultancy charges in automatic enrolment schemes. This will apply to both personal and occupational pension schemes providing money purchase benefits.

Under the draft regulations, a scheme with a provision allowing amounts to be deducted from a jobholder’s pension pot or contributions will not be an automatic enrolment scheme if that amount is to be paid to a third party under an agreement between the employer and the third party.

These draft regulations will not affect pension schemes where there was a legally enforceable agreement in place between an employer and a third party before 10 May 2013.

In my statement on 10 May 2013, I announced the Government’s intention to publish a consultation in the autumn following the publication of the Office of Fair Trading’s market study on charges in defined contribution workplace pensions. As part of this, I intend to consult on extending the prohibition on consultancy charges to all qualifying schemes. Regulations could be introduced using the power in clause 35 of the Pensions Bill, subject to the successful passage of the Bill currently before the House.

Triennial Reviews

Steve Webb Excerpts

Thursday 27th June 2013 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Triennial reviews of non-departmental public bodies are part of the Government’s commitment to ensuring accountability in public life. Later today I will launch a review of the Pensions Regulator, the Pensions Advisory Service, the pensions ombudsman and the pension protection fund ombudsman. This review will look at the functions of all four bodies and whether they should continue to exist in their current form. If the review determines that these bodies should continue, it will go on to consider whether they are operating in line with the recognised principles of good corporate governance. I will inform the House of the outcome of the review when it is completed and will place a copy of the review in the Libraries of both Houses.

Social Fund (Annual Report 2012-13)

Steve Webb Excerpts

Thursday 27th June 2013 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

The Secretary of State’s annual report on the social fund for 2012-13 will be published later today.

The report records that total gross expenditure in 2012-13, excluding winter fuel payments, was £924 million. This figure includes 197,000 non-repayable community care grants and more than 2.8 million interest-free loans awarded worth over £558 million. Also, cold weather payments worth over £146 million, funeral payments worth £43 million and Sure Start maternity grants worth £39 million were paid.

In addition, over 9 million households benefited from a winter fuel payment at an estimated cost of around £2.1 billion.

This has been an important year in the history of the social fund as preparations were made to abolish those parts—community care grants and crisis loans—that had not kept pace with wider welfare reforms. They were too complex for ordinary people to understand and were poorly targeted, failing those they were meant to help the most.

From 1 April 2013 new local provision began, developed by upper tier local authorities in England and under arrangements made by the Scottish and Welsh Governments. I would like to take this opportunity to thank local authorities and the Scottish and Welsh Governments for the way in which they have engaged with the Department to deliver this significant change and to ensure help is now being targeted at those most in need.

The “Social Fund White Paper Account 2012-13” will also be laid in Parliament today. This publication provides an audited account of the social fund’s receipts and payments and notes on key balances.

This year, following nine years of qualification, the Comptroller and Auditor General is satisfied that the social fund is making award decisions materially in accordance with Parliament’s intentions and has not qualified his opinion on the regularity of social fund awards. The National Audit Office has tested samples of awards during the year and estimated the value of most likely error to be just 0.68%. This is a significant achievement for the Department and is the culmination of focused work over a number of years.

The social fund commissioner’s report on the standard of social fund inspectors’ decisions was published on 24 June.

All three of these documents will be available later today at: https://www.gov.uk/government/publications.

Pension Protection Fund (Compensation Cap)

Steve Webb Excerpts

Tuesday 25th June 2013 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

On 4 December 2012, during the Adjournment debate on the position of the Visteon pensioners, I announced that I would be conducting a review of how the Pension Protection Fund compensation cap operated, particularly in relation to those who have been members of a pension scheme for a long time.

The Government accept that the PPF compensation cap could have a disproportionate effect on some people who were members of a scheme for a long time. As a result, I propose that the compensation cap will be increased by 3% for every full year of service above 20 years. There will still be a maximum, which will be double the standard cap.

It is my intention to bring forward legislation to revise the compensation cap as soon as parliamentary time allows.

This revised compensation cap will not be backdated: anyone covered by this change who is already in receipt of capped compensation will get any increase from the date the relevant legislation is in place. The revised cap will also affect any scheme that does not enter the PPF, but only where it begins to wind up or enters the PPF assessment period after the revised cap is introduced.

For example, a person who has been a member of a pension scheme for 40 years and had accrued a pension of £50,000 would, if they took their compensation on reaching age 65 today, be paid a capped amount of £31,380. Following my proposed change, this person would see their compensation increase to £45,000.

Child Support (Miscellaneous Amendments) Regulations 2013

Steve Webb Excerpts

Monday 17th June 2013 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Later today the Government will be publishing their response to the consultation on the Child Support (Miscellaneous Amendments) Regulations 2013 (“the regulations”). The regulations make amendments to the Child Support Maintenance Calculation Regulations 2012 (“the 2012 regulations”), which set out rules on the calculation of child maintenance under the new statutory scheme. The consultation on the regulations was held between 1 March 2013 and 12 April 2013.

The Government consulted on the following amendments to the 2012 regulations, which will allow the Secretary of State to: use current income information as the basis of the maintenance calculation where historic information from HMRC cannot be requested or obtained; accept a nil income figure from HMRC in order to calculate child maintenance liability (a simplification measure, as previously a nil income figure would have required action to seek current income information); and to allow previously agreed variations to child maintenance liability to be reinstated automatically in appropriate circumstances.

The aim of the regulations is to provide a faster, more accurate and transparent process for assessing child maintenance payments.

There were four responses to the consultation, which have been carefully considered. The Government maintain that the proposals outlined in the consultation represent essential preparatory work necessary to allow the new scheme of child support maintenance to be gradually opened to all new applicants.

Other amendments are made by the regulations, which were not consulted on because they did not represent changes to policy. Amendments to child maintenance regulations have been made in response to legislative changes to child benefit. These amendments clarify that parents who elect not to receive child benefit payments will be treated in the same way as those that continue to receive the payments. The regulations also make minor consequential and technical changes to other child maintenance regulations. We intend to lay the regulations later this month.

I will place a copy of the Government’s response to the consultation in the House Library later today.

The Government’s response to the consultation will also be available on the GOV.uk website later today at the following address:

https://www.gov.uk/government/consultations/the-child-support-miscellaneous-amendments-regulations-2013.

Pensions Bill

Steve Webb Excerpts

Monday 17th June 2013 Commons Chamber

[Mr Byrne]

We were ambitious and wanted to focus our resources on tackling pensioner poverty. I am reluctant to take too many lessons from the Secretary of State. The 1986 cap introduced by Lord Lawson led to a huge drop in contributions to occupational schemes. In fact, the pensions Minister himself said:

“Pensioners have long memories. They remember the Conservatives’ record on pensions…That record is one of not believing in the state pension, of eroding the basic state pension…of attacking SERPS—the state earnings-related pension scheme—and of slashing entitlements.”—[Official Report, 6 November 2000; Vol. 356, c. 34.]

I am afraid, therefore, that I am reluctant to take lessons from the Secretary of State on the inheritance that he has been bequeathed. As I have said, the foundation was strong and that is why we are urging him to be a touch more radical. I think that, in his heart, the Secretary of State will share many of my concerns. I know that he has been trapped in difficult negotiations with the Chancellor and I have no doubt that he would otherwise have gone further than he has in the Bill.

My first question is about universalism. Every generation has to strike the right balance between universalism and targeted benefits. That was true of the post-war Government and it is true of this Government. The Opposition believe that there needs to be a different balance between universal and targeted benefits for older people in the future. We find ourselves in agreement on that not just with the pensions Minister in this morning’s Financial Times, but with the Deputy Prime Minister and possibly even the Secretary of State, although he will keep his own counsel.

Our biggest problem with the Bill is that if the flat-rate pension is so virtuous, its virtue should be enjoyed as widely as possible. It should be a universal pension, but it is not. In particular, we are very concerned about the 700,000 women who will reach the age of 65 in 2016 when the flat-rate pension starts but who, because they will have hit the state pension age of 63, will not enjoy the flat-rate pension, even though a man who was born on the same day will. There are many of those women in our constituencies. I know that this matter will be of concern to the Minister and the Secretary of State.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Will the right hon. Gentleman give way?

[Mr Byrne]

I will give way in a moment. I will just flag another issue that the pensions Minister might say a word about when he intervenes.

There is an uplift to 35 years-worth of contributions being required before 100% entitlement to the flat-rate pension is enjoyed. That was not the original plan that was presented to the House in the Green Paper. When the Minister gave evidence to the Work and Pensions Committee, he said that the change would save roughly £1 billion. Five years’ more contributions will now be needed before the full pension is enjoyed, so up to 100,000 fewer people will receive the full pension than if the current system had continued. For every year under 35 years, people will enjoy £4.11 less a week. Of course, someone with below about seven or 10 years of contributions will get nothing at all.

We recognise that the minimum income guarantee will remain in place, but we are concerned that the many people who fall short of 35 years and the women to whom I referred will be rather too close to the poverty line for the liking of everyone here.

[Steve Webb]

The right hon. Gentleman mentioned the position of women born between April ’51 and April ’53. Will he clarify whether the Opposition have a specific proposal? It has been suggested that his view and that of his colleagues is that such women should be allowed to opt into the single tier. Is he aware that the cumulative cost of that over 30 years would be about £4.5 billion? Is that an example of his laser-like focus on public spending control?

[Mr Byrne]

I suspected that the pensions Minister would want to play politics with this issue. However, I hope that we can engage on it constructively in Committee.

The DWP has published estimates that show that the cost of including those women will be about £220 million a year. I say gently to the Secretary of State that the change that he is taking through the House today will net the Chancellor £5.5 billion in extra national insurance contributions in 2016-17 and £5.4 billion in 2017-18. The Chancellor has obviously spent some of that money for the Secretary of State by funding the proposals for social care, which are scored at £1 billion in 2016-17, and by funding employment allowance, which is scored at £1.6 billion. There is therefore £2.9 billion left. The cost of remedying the position of these women would be about 7.5% of the remaining NICs windfall that the Secretary of State has kindly brought the Treasury and just 4% of the overall NICs windfall. We are looking forward to working with the pensions Minister in Committee to fix this injustice, which I suspect he also feels in his heart.

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[Mr Byrne]

As the hon. Gentleman will know, many of these women have already been hit by the acceleration of the state pension age at very short notice, so no—we want to search during Committee stage for ways to include these women. I know there will be many women in such a position in his constituency, and I am sure he will want engage in that debate.

[Steve Webb]

rose—

[Mr Byrne]

No—[Interruption.] I will certainly give way to the Minister in a moment, but I want to underline one final aspect of universalism and the increases in the state pension age to which the Secretary of State referred. The Opposition will not stand in the way of proposals in the Bill to move forward the state pension age, but we want to put it on the record that we are concerned about the proposal to review it every five years. The goalposts on state pension age have already been moved a number of times in this Parliament, which is not good for stability, certainty or long-term planning.

I represent one of the poorest communities in the country and there is a 16-year gap in life expectancy between my constituency and Lichfield, a little way up the road. The mortality figures published by the Library over the past few days show that 1.2 million citizens die between the age of 65 and 69, and 60% of those are in the bottom three income groups. Mortality rates for the poorest in our country are twice the level of the richest, and we must take great care, not just with projections about life expectancy, but also about healthy life expectancy. The Secretary of State is asking for the power—unfettered —to review the state pension age every five years, which we think will promote uncertainty and instability, and damage the pensions savings rate that he seeks to increase.

[Steve Webb]

I believe the shadow Secretary of State has inadvertently misspoken. Will he confirm that no women born between 1951 and 1953 have had their state pension age changed by this Government, that any changes to their state pension age were made under the Pensions Act 1995, and that they have not had their pension age changed at short notice?

[Mr Byrne]

The Minister is right. I was referring to the problem that the state pension age has been moved a number of times in the past three years. The Opposition believe that it is unwise of the Secretary of State to ask for the right to review the pension age every five years because it will promote instability.

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[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to be called in this debate and to welcome this much-needed reform. I served on the Work and Pensions Select Committee when we conducted pre-legislative scrutiny of the Bill, so I have already gone through the detail once. The Secretary of State issued an open invitation to Members to serve on the Bill Committee, and I sense that I might be so honoured.

[Steve Webb]

indicated assent.

[Nigel Mills]

It is unusual for Ministers to welcome that, given my record of moving amendments, so the Minister might want to be a little careful, before he gets too excited. [Interruption.] Yes, it might spare me.

We all share the Government’s vision for pension reform. We want predictable, non-means-tested state pension provision, so we know roughly what we will receive when we retire; then we want to encourage private saving in high-quality, fair, low-cost schemes and to know what we will get for our money when we pay into such schemes and how that will convert into retirement income when we reach retirement age, whatever that might be—being 38, I dread to think what mine will be: I suspect it might begin with a 7, which seems an awfully long way off.

The Bill addresses some of those aspirations—it will make it much clearer what state pension some will get when they reach the happy age and it will improve the private pensions system—but will do nothing to improve the final part of the journey and make it clear what will happen when someone reaches that happy retirement age and is told they need to convert their pension pot into a pension income. There remains a big weakness in the system around how fair a deal someone gets when they default into the annuity their pension provider offers them—that was something the Select Committee raised in our pensions governance report. Action is needed. In my view, we should not allow a pension provider to provide an annuity to the same customer. That might be too radical a market restriction for most people, but there is a real problem if people, having saved for years, see their retirement income reduced because they do not know that they can shop around and choose their annuity.

The Bill is clear that people who will retire a good few years after 2016 will get £143 plus indexation, whatever that is, but it is less clear for those retiring in 2016 or the first few years thereafter. For them, there is a complicated calculation involving what they built up under the current scheme and how that is added to under the new one. We need to educate people about the pension they will get and what the change means. In my surgeries, I hear many concerns and fears from people who thought this was some kind of big bang—that if they retired on the new date, they would get a much bigger state pension than those retiring the day before—and did not want to miss the start date. I suspect that for many people the difference will not be huge, however, so those concerns should not be there.

--- Later in debate ---

[Mr Iain McKenzie (Inverclyde) (Lab)]

I will focus my comments on issues raised with me by women from my constituency who were born in the early 1950s and who perceive an injustice in the changes proposed for state pensions. We are all well aware—especially at this time—of the great importance the public place on pensions, as evidenced by the reactions we have seen to any proposed changes. Perhaps we need a requirement that any changes to pensions should give as much notice as possible to those affected, so that they can plan for and address those changes. We can, therefore, appreciate the apprehension displayed by people up and down the country when further changes to pensions were announced, including the intention to introduce a single-tier state pension for future pensioners from April 2017. I support the single-tier pension, but seek to highlight what I believe is an unfair outcome for one group of our constituents.

The problem with implementing the single-tier pension on 6 April 2017 is that a group of women born in the early 1950s will not be eligible for it. Around 700,000 women born between April 1951 and July 1953 will miss out. They will be deprived of many hundreds of pounds a year on average—money they could well do with in these austere times. Women born in this period are, quite rightly, angry at what they see as a dual adverse impact of the increase in their pension age and their non-eligibility for the single-tier pension. They will be forced to wait longer to retire, and will miss out on the new £144 pension. Instead, they will receive around £127 a week. Even the DWP’s own research concluded that that

“could have a significant impact on the state pension received over the course of a lifetime, in comparison to a man with an identical national insurance contributions”.

It is so obviously unfair that women born between 6 April and 5 July 1953 have been particularly disadvantaged by the changes to the state pension. Not only have they had a second increase in state pension age imposed on them—this time at very short notice—they will now not receive the improved pension.

The campaigner Louise Fox, born on 23 June 1953, says:

“In principle, I welcome the move to a flat-rate pension because it will bring to an end the poor state pension deal that most women get, but we have been left on the sidelines.”

She goes on to say that the Government could do a number of things such as allow women in that group who retire before April 2017 either to switch to the new single-tier pension after that date, or to delay taking their pension until 6 April 2017 and then enrol in the new single-tier pension scheme.

[Steve Webb]

I understand the confusion because we did originally propose to introduce these measures in 2017. Since then, however, we have brought forward the start date to 2016, meaning that the constituent to whom the hon. Gentleman refers will get the single-tier pension if she was born in June 1953.

[Mr McKenzie]

I thank the Minister for that information. Louise Fox is not my constituent, but she will find that intervention very welcome.

One further worry is that April 2017 is still not set in stone as the date for the start of the new system, and we have been told that it has now changed. Women in this disadvantaged group want to know why they have to wait until age 66 to claim their pension, and some cite losses of £30,000. They ask, “Can this really be true? Why have we been so penalised? Why are the Government treating us so badly? What have we done to deserve this?”

The Government claim that they must be “absolutely transparent” about who will lose out, yet they failed to make clear the full consequences of the planned reforms. The Work and Pensions Committee undertook pre-legislative scrutiny of the Government’s proposals, and heard from many women born between 1951 and 1953 who believed that they would suffer. There was concern about some 85,000 women born between 6 April and 5 July 1953 whose state pension age increased a second time under the Pensions Act 2011, and who will just miss out on eligibility for the single-tier pension if implemented in April 2017, although that has now changed.

In evidence to the Committee, Professor Jay Ginn argued that because women in that group were having their state pension age increased and were typically heading for relatively low state pensions, it would not be unreasonable for them to receive the single-tier pension when it is introduced.

Those women must pay national insurance for several extra years and will receive their state pension later than women for whom the state pension age was 60 and they will receive a lower pension than men and women whose state pension age is a few years later. That is a double-whammy for women born at the wrong time. The stated intention of single-tier pension proposals was to reduce gender inequality in state pensions, but it will be magnified.

As men were allowed to receive winter fuel payments at women’s state pension age, it would not be unreasonable for that relatively small group of women to receive the single-tier pension when it is introduced. Age UK has suggested that that they could be given the option of being treated equally with men of the same date of birth. My hon. Friend the Member for Aberdeen South (Dame Anne Begg), the Chair of the Work and Pensions Committee, was in favour of ensuring that women caught in the transitional group are protected.

Department for Work and Pensions analysis has shown that most women in the group—85%—would receive more in lifetime state pension and other benefits under the current system than they would receive if their state pension age was 65 and they received the single-tier pension. Obviously, its argument was centred on a long life expectancy, and it ignored the fact that the situation would be different for those who died relatively shortly after retirement. Life expectancy can vary by 10 years from one side of my constituency to the other. We can realistically assume that many of those who die early are among those who were least well paid during their working lives.

A group of women in Inverclyde who are affected by the changes come to see me regularly. They are angry that they will lose out because they will reach pensionable age prior to the proposed date. One such constituent, Mrs Christine Houston of Port Glasgow, told me she was made redundant and experienced economic hardship as demand for her company fell. She managed to find a part-time job but works unsocial hours. Her benefits, which act as a safety net to allow her to live, have been cut, and now she will be unfairly affected by the Government’s pension reforms. Despite having started work at 16 and having paid her share of taxes ever since, she has no idea how she will plan for her retirement as a direct result of the Government’s actions. Another lady, Mrs McKay, also of Port Glasgow, will lose out when the single-tier pension is introduced. She believes the Government are discriminating against her. At least 600 women in my constituency will be affected by that double-whammy. Two wrongs do not make a right.

My opinion has always been that the measures are unfair for two reasons. First, they give no chance for those people to prepare for their retirement and adjust to changes in the state pension age. As I have said, as much warning as possible should be given before any change in pension age. Secondly, the measures disproportionately affect a group of people—women in their late 50s—who are among the least well equipped to bear the brunt of the Government’s failed economic policy. A woman in her mid-50s will have average pensions earnings of just over £9,000, but, on average, a 56-year-old man has more than £52,000.

The women hit by the changes are the backbone of the UK. They are mums who took time off work to bring up children, daughters who helped their parents as they got older, and grans who help their children to have a work and family life by providing child care for grandchildren. Frankly, the measure is a disgrace, and the Government should have regard to that group of women, who have done nothing wrong except to be born in the early ’50s. I call on the Government to play fairly and reasonably with those women. I hope that there is a consensus in Committee and that we can find a way of righting that injustice for those women.

--- Later in debate ---

[David Mowat (Warrington South) (Con)]

Like many other Government Members, I strongly support the Bill. My hon. Friend the Member for Aberconwy (Guto Bebb) described it as bringing simplicity and fairness. He also described it as a “brave” Bill, although I assume that he did not mean that in the “Yes, Minister” sense. It will reduce complexity and regularise the treatment of women, but I want to talk about the way in which it will interact with the private sector pensions industry. I also want to build on some of the comments made by the hon. Member for Edinburgh East (Sheila Gilmore).

There is an elephant in the room when we talk about pensions provision in this country. The fact is that, even when the Bill has increased the basic state pension, that provision will not be enough for most people unless it is supplemented by the private pensions industry. Broadly speaking, pension provision in this country can be divided into thirds: one third of people are in public sector pensions, one third are in the private sector, and a third have no pension provision at all. For that middle third who are in the private sector, it is almost certain that their pension pot will not be large enough.

We have heard Members talking about the comparison between private and public sector pensions, and Parliament has debated public sector pensions endlessly. We have probably ended up in a good place in that regard. Someone cashing in an inflation-proofed pension of £15,000 a year—a self-invested personal pension, for example—at the age of 65, would have a pot of £400,000. For most people in the public sector, the value of their pension is likely to be higher than the value of their house.

The size of the median pot in the private sector is about £10,000. That is partly due to poor savings ratios. This matters, because our country has chosen to go with a pension system that is different from those in most of Europe, where there is higher basic state provision and no assumption that, by paying out tax relief, the private sector will somehow come through. The fact that the private sector has failed in this country represents a time bomb, and I shall analyse why that is the case. We need to look at that time bomb, even though there are some good things in the Bill.

One reason that people are not saving is that there is massive distrust of the industry. I have many colleagues in the private sector who would almost cut their arms off than invest in the pensions market. They would do anything to avoid doing that. They would buy houses to rent, for example. Perhaps that is a rational response to a market that has failed. I am a free marketeer. I sit on this side of the Chamber and I believe in markets. If they work, they get rid of supernormal profits and unfair advantages, and all that goes with that. However, they will not do that when there is an asymmetry of information in the market, and when that market has failed. I would contend that the market for private sector pensions falls into that category.

We have the highest pension charges in the world, according to Cass business school’s pensions institute. I know that we are coming out of a period of relatively low returns and that the numbers are therefore suspect, but someone could be spending 50% of their pension pot on charges, and 2.5% compounded over a few years does that to someone unless things are going up. There is absolutely no evidence of economies of scale in our larger funds, which is completely unlike the situation in the United States, where charges come down as the size of funds goes up.

We have too many pension funds. When I open the Financial Times, I see that there are more funds than there are equities, which is extraordinary. That is indicative of a market that has not had to consolidate because it has not been put under pressure by market forces. We also have exploitative techniques. I will not go into that in great detail, but the fact that active member discount has gone on for so long—there are now proposals to get rid of it—is extraordinary.

The way to make a market work better is to make it transparent. I have spoken with the Minister about the industry and I know that he is trying to make it move in that direction, and I respect that. The industry—I used to work in business, and in fact in the same business as the shadow Secretary of State—in my opinion is doing what we sometimes did: playing it long. It knows that it is making unacceptable profits and that that will have to change, because eventually this place will get around to fixing it. In such a situation, it plays it long. It is beginning to regularise charges and to talk about annual management charges, but of course that is different from total expense ratios. There are entrance fees, exit fees, churn fees and trailing commissions. I have a double maths A-level, an engineering degree and I am a chartered accountant, and I can just about understand this stuff. The idea that most people who are having to buy pensions could be educated to such a degree that they could make the market work is ridiculous. The market knows that and the result is a median pension pot of £10,000. It is a crisis, even with the welcome response that Government Front Benchers are putting forward tonight.

Auto-enrolment is clearly the right thing to do, but it makes it even more important to fix this issue, because we are now semi-making people invest their money in a market, and if the market is not working because we cannot be bothered to fix it, that is a moral issue. I talked earlier about NEST. I think that a low-cost passive tracker is exactly what is needed. I do not have a particular liking of state-based solutions, but I return to the fact that the market has failed. I understand that the Office of Fair Trading is conducting an inquiry into fund charges—the Minister nods his head—which I welcome. By my remarks I am not implying that we are doing nothing; I am implying that this remains an issue. The words I used—I would like them to be remembered—is that the industry is playing it long and that this is now a moral issue.

There is new stuff coming out, and I think that the Association of British Insurers has said that the charge is 0.54%, and that that is reasonable. It would be reasonable if it were not for the fact that so many people are being auto-enrolled into old funds that have much higher profit ratios. I really wonder what that 0.54% even means. Is it a total expense ratio or an annual management charge? How many of the other millions of charges that generally are not included are counted within that figure? The whole thing needs to be fixed.

What would I like the Government to do? Well, we should strengthen NEST. As I have said, I would prefer the private sector to come up with solutions to make the market work, but it has failed to do so and the time has come to act. Denmark has very low charges on pensionable assets, and it has achieved that through something very similar to NEST, and other countries are moving in that direction.

I have not yet talked about the portability of pensions. I read the Select Committee report on the issue. I am surprised that we have gone for the solution of having the pension follow the employee into their next job. I have not done the analysis, and the issue requires a lot of that, but that does not feel to me to be the optimum solution for the employee.

I do not often agree with the TUC, but I believe that its representatives have said that, based on their analysis, an aggregator would appear to have been a better solution. If we have done what we have done because of the survey cited in the Select Committee report and other sources, that is not a good reason. If we ask 100 people, 98 of whom might understand the fundamentals, whether they would like to take their pension to the next job or to an aggregator, I really doubt that they would understand.

If the survey is the basis of the analysis that has been done, it is a cop-out. That said, if there is analysis out there that says that what has been chosen is the right way, so be it.

[Steve Webb]

indicated assent.

[David Mowat]

The Minister is nodding, so I will not push the point. However, we are in the new world of portfolio careers, where people change jobs eight, nine or 10 times, with entrance and exit charges every time. I find the point hard to see, but okay.

I have four suggestions for the Bill Committee; if any Whips are listening, I should say that I will not be a part of it. I think there is a case for a cap. The industry sometimes says that a cap would drive down innovation, but we do not need more innovation—we need solid, passive investments that we leave and let go for a long time.

I would like there to be more enforced simplicity. We should look at what the Department of Energy and Climate Change has done with electricity and gas charges. It has insisted that bands should be brought in so that there is comparability and consumers can say, “I’ll go with them” rather than being swamped in a myriad of complexity. Pensions are massively more material to the well-being of most people than utility bills, yet they are massively more complex. Perhaps we could consider standard charges and standard comparisons of the annuity market, so that when people choose an annuity they are much more able to make a reasoned decision. The Cooper reforms in Australia are an example of that, and I would like us to move down that route.

I have given annuity transfers a great deal of thought. I know that the market is saying that people will be sent letters to ensure that they have checked out the market before they go with their base supplier. Personally, I think there is a case for saying that the base supplier should not be allowed to provide an annuity. If we really want to force the market to work, we should do something such as that. If we are going to leave the matter with the base supplier or the organisation that the person has saved with, we could ensure that they register so that we know that people have properly considered the option of going elsewhere.

Finally, I turn to tax relief. I said at the start that our pension system has a structure different from that of a lot of countries in Europe. We have smaller basic provision; we then give a lot of tax relief and hope that the private market will take care of the situation. We spend about £30 billion a year on tax relief.

--- Later in debate ---

[The Minister of State, Department for Work and Pensions (Steve Webb)]

We have had five hours to talk about pensions—what could be better? The debate has been unusual in the sense that the Government have had support for the Bill and its principles from Members on both sides of the House. That is vital, as the Chair of Work and Pensions Committee and others have said. Pensions reform that will last and that will not be blown about by changes of Government—in the long term, obviously—is a good thing. I welcome the fact that hon. Members on both sides of the House have welcomed the Bill and its central measure, the single-tier pension.

My right hon. Friend the Secretary of State began the debate in characteristically statesman-like fashion and in a non-partisan way. Unfortunately, that was not immediately followed. This reform deals with fairness, gives decent pensions to women, and tackles the poor pension position of the self-employed, which is vital. The right hon. Member for Birkenhead (Mr Field), who is no longer in his place, set hares running. He seemed to believe that assisting the self-employed is pork-barrel politics because, apparently, the massed ranks of the self-employed are all Liberal Democrats, which I was pleased to hear.

I am pleased that my coalition colleagues and my hon. Friend the Member for Leeds North West (Greg Mulholland) welcomed the measures on the self-employed, who for many years have been excluded from the full state pension. The previous Government recognised that there was a problem and did a research report. I am not sure whether the right hon. Member for East Ham (Stephen Timms) was the Minister with responsibility for pensions at the time or which of my 10 predecessors was, but I found the report on the top shelf when I moved in. It had been put in the “too difficult” box, which was overflowing. This Government have grasped the nettle and provided for the self-employed to be full members of the state pension system. I have never heard a Government measure described as too good to be true, as that measure was described today, but I can assure the House that the deal is that the self-employed are full members. Low-earning self-employed people pay more national insurance than their low-waged counterparts. It therefore is not a freebie—the self-employed pay national insurance, and they should be part of the system.

I shall try to address the specific issues that arose during the debate. Several members of the Work and Pensions Committee spoke. I am grateful to the Chair of the Committee, the hon. Member for Aberdeen South (Dame Anne Begg), my hon. Friend the Member for Amber Valley (Nigel Mills), the hon. Member for Edinburgh East (Sheila Gilmore) and their Committee colleagues for their pre-legislative scrutiny of clause 1. They suggested a number of amendments, including putting the start date of 2016 in the Bill, which we have done, and making 10 years the maximum minimum for a pension, which was welcomed by my hon. Friend. He pressed me mercilessly when I gave evidence, and we were pleased to give him what he wanted. I was keen on having him on the Public Bill Committee, but went a bit cool on the suggestion when he said he likes to table amendments.

I will address a number of the substantive issues raised in the debate in turn, the first of which is the move from 30 to 35 years. To be clear, 30 years currently gets people a basic state pension of £110 a week, and 35 years gets people a full single-tier pension of £144 a week. We are therefore not comparing like with like. As my right hon. Friend the Secretary of State has said, the Government are merging a basic pension for which people work for 30 years with a second pension, for which people might work for 50 years. Thirty-five for the merged pension is therefore hardly ungenerous. If people who have already retired on the expectation of 30 years would have got more under the old rules than they will get under the new rules, they will get what they would have got under the old rules, so nobody in that situation will get less than they were expecting.

That brings me on to women born between 1951 and 1953. To be clear, they will receive their state pension on the day they would have got it if Labour had continued in office. We have not changed their state pension age. They will receive the pension they would have got had Labour continued in office. We have changed, with one exception, neither their pension age nor their pension amount. To hear Opposition Members talk about this group of women, one would think we have ripped them off, taken money off them and created losers. They are getting the pension they were going to get on the day they were going to get it.

There is one exception to that. We have changed something for this group: we have given them a bigger pension, because of the triple lock. If the Labour Government had continued in office, their pension would have been price indexed. We introduced the triple lock, so each one of those women born between 1951 and 1953 will receive a bigger pension under this Government’s policy than under the continuation of the previous Government’s policy.

[Mr Byrne]

The Minister is making a powerful winding-up speech. He told the Financial Times this morning that he has not set triple-lock policy for the next Parliament. Is that still the case?

[Steve Webb]

Let me be absolutely clear: the triple lock, as a concept, was in the 2010 Liberal Democrat manifesto. It was agreed and implemented by the coalition, and I want it to carry on after the next election. There is no question about it. I should add that all the figures in the coalition’s impact assessment on the Bill are premised on the assumption of the continuation of the triple lock.

[Mr Byrne]

Is the Minister saying to the House tonight, and will the Chancellor confirm in the spending review, that the triple-lock policy will apply to this pension for the next Parliament—yes or no?

[Steve Webb]

Just to be clear, the single tier comes in in 2016, which is not within the scope of the spending review, as the right hon. Gentleman probably knows. I was interested in what he had to say about pension spending, because apparently pensions will be included in the cap on welfare. As I understand it, if a Labour Government had a bad year on housing benefit, they would take some money off pensions. How would they do that? We were told this week that they would not undermine the triple lock, so what is left? They are in favour of raising the state pension age. As I understand it, if they have a bad year on housing benefit they will jack up the state pension age in the next year to make up the shortfall—that does not make any sense.

[Mr Byrne]

Will the Minister give way?

[Steve Webb]

I have given way to the right hon. Gentleman twice already, so I will make some progress.

A number of hon. Members raised matters of detail. I thank my hon. Friend the Member for Rochester and Strood (Mark Reckless), who said that he had approached the Bill in a spirit of scepticism. He is right to have done so. We should approach all new pension reforms in a spirit of scepticism, because there have been so many of them. One of the nicest things anyone has ever said to me is that the more he found out about the Bill the more he liked it. I am grateful to him for that.

My hon. Friend the Member for Rochester and Strood asked a specific question on whether someone who defers under the current system past 2016 will continue to receive the current generous terms after 2016. He also paid tribute to the staff in the House of Commons Library—he mentioned Djuna Thurley specifically—who have to wrestle with complex legislation. I echo that tribute. A lot of legislation is complex and difficult, and I think all of us accept that the Library provides us with great support.

My hon. Friend the Member for Thurrock (Jackie Doyle-Price) asked about another group and the whole issue of derived rights. The single-tier pension is designed for the future, whereas the current state pension system is rooted in the 1940s when men had jobs and women had husbands. We cannot go on like that. We have introduced a lot of transitional protection. For example, there was an option for women to pay something quaintly called the married woman’s stamp. If they did that at any point in the 35 years up to their pension age, we would protect them and pay them the pension they would have got. There is extensive transitional protection.

My hon. Friend raised the question of what she described as homemakers. People who are not in the paid labour force can still receive protection for their pension rights in a number of circumstances. If they are at home with children, caring for an elderly or disabled relative, or are unemployed and looking for a job, they receive credits. If they are too sick to work, they receive national insurance benefits credits. So a whole raft of circumstances are covered.

My hon. Friend mentioned a specific and narrow group of people—childless homemakers. Interestingly, at the start of her speech, she said how important the contributory principle was—I agree with that—and she was right that in many ways the Bill reasserts that principle. To reassert it, however, and then say that someone who has paid no national insurance, not been a carer, not been looking for work and not been too sick to work should none the less get a significant pension creates a tension. I can reveal to the House that she and I discussed this issue in the Tea Room before we got here, and she said, “But aren’t you changing the rules late in the day?”, as she also said in her speech. We have to strike a balance between moving to a new system and protecting people as we move, and not setting in aspic every single corner of the old system.

The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) said, “You can’t go on running two separate systems”, and then demanded that we keep various bits of the old system going for another 15 years while running two separate systems. I would say to my hon. Friend the Member for Thurrock, then, that there is extensive protection. If the lady in question were widowed, for example, there would be pension credit of £145, so if she had nothing else she would be brought up more or less to the same level. Extensive protections are in place. I cannot promise that every single person will be protected in every single respect, and nor should I, but there is extensive protection.

[Gregg McClymont]

I want to correct the Minister. I did not suggest that we could not run two systems in parallel; I was merely pointing out that when we talk about the simplicity of this new pension, we have to take it into account that two systems will be running in parallel. I did not say it was an argument against the Bill in toto, but it is a point that we must all bear in mind when considering a simple pension system.

[Steve Webb]

The hon. Gentleman raised a lot of questions, which it is his job to do obviously, but did not offer any solutions. He gave a case study of someone born between 1951 and 1953 and said how unfair the system was. I want to stress that the person he gave an example of will get exactly the pension she was expecting on exactly the day she was going to get it, so we have not changed anything about that person’s pension. We have, however, triple locked her pension, which is better than she might have expected under the last Government, so I think we have done the right thing.

Opposition Members drew a comparison between women in that age group and men born on the same day. Let us try a thought experiment: if we were to impose a sex change on all 700,000 women in this group, 95% of them would not thank us—financially at least, although perhaps for other reasons as well. Getting on for 95% of them would say, “Why did you do this to me? Yes, I might get another six quid a week, but I’ll have to wait two or three years longer for it.” That is not a good deal. We have worked out that it would take many of these women 30 years of retirement to recover what they lost through waiting longer for their pension.

The hon. Member for Glasgow North East (Mr Bain) mentioned people with short life expectancies, as did the hon. Member for Inverclyde (Mr McKenzie). People who do not live long after pension age want to have their pension as early as possible, and again the last thing these women want is to get their pension when men do, because if they are not going to live long past the pension age, they will want their pension straight away, not later. The comparison with men born on the same day, therefore, is a false one. Overwhelmingly, these women will do better than a man born on the same day.

The hon. Member for Banff and Buchan (Dr Whiteford) made a thoughtful speech. I was impressed with almost all of it, expect the bit when she was pressed by Scottish colleagues about independence, at which point she became shifty and evasive. [Laughter.] I think that is just about parliamentary. It is clearly that independence would mess up pensions big time. The whole debate today has been about simplification and people knowing where they stand. How on earth would we splice together different countries’ national insurance records, cross-border deficits—

[Dr Whiteford]

rose—

[Steve Webb]

Just a minute. I am enjoying this too much.

How would we splice together different countries’ national insurance records and cross-border deficits? It would suddenly be an international scheme, so we would have to fund it immediately. This is a classic case of where we are better together. It is a simpler system and one where people know where they stand. Reinventing another system north of the border and then trying to splice it back together, particularly when so many people work north and south of the border, would create a great deal of disruption for people. We have spent the last five hours saying how we need to make things simpler.

[Dr Whiteford]

Does the Minister accept that Scotland is currently spending a smaller proportion of its GDP and revenues on pensions and social protections than the rest of the UK, so there is no question of the affordability of pensions? Does he also accept that on average people in Scotland live two years less than those in the rest of the UK?

[Steve Webb]

The hon. Lady raises the issue of pension spending in Scotland. She will know that Scotland is ageing at a faster rate than the rest of the UK, so the long-term spending pressures there are greater, and that would need to be addressed.

On the important issue of differences in life expectancy across different areas, clearly there are differences. I accept that, but across the board we are seeing a rising tide that is lifting all boats. For example, over the last quarter of a century, life expectancy at 65 has risen for men in the least privileged class by 21% and for those in the most privileged by 22%. In other words, we have seen significant increases across the board. Therefore, although we absolutely have to tackle the causes of differences in life expectancy, that cannot be a reason for paying pensions at a rate that was set a century ago.

My hon. Friend the Member for Warrington South (David Mowat) got great praise from those on the Opposition Front Bench, which I hope will trouble him. He asked whether there is any analysis that underlies our decision; I can assure him that there is. He asked why we do not shunt all those with small pots to NEST—that was the proposition. We are talking about a pot limit of £10,000, so if all the small pots in a single year went to NEST, it would be become enormous and unbalance the market. Unless we wanted NEST to become huge, we would have to have a low pot size limit to make it work, with NEST becoming the home of small lost pots. However, if we did that, we would end up with significant fragmentation. In other words, with a low pot size limit, people might have something in NEST, a few thousand pounds they can do nothing with in another provider, their current pension—[Interruption.] What I can suggest to my hon. Friend, if I may—I have only a few minutes—is that he looks at our Command Paper, Cm 8402, which provides the analysis that underlies this, and if he is not satisfied after that, I am happy to have a coffee with him.

A number of other issues were raised in this debate. The hon. Member for Edinburgh East made an exhausting—sorry, exhaustive—speech. To be fair to her, she made some quite important points. She said that the single tier was not a windfall or a great leap forward. When she quizzed me in the Work and Pensions Committee, she said—and I quote—that it is not exactly “fandabbydosey”. She is right: it is not fandabbydosey; it is a simplification. It is about spending the money that we were going to spend, but better. She also said that SERPS was great and asked whether it would not have been better to continue with it. However, the fundamental problem is an unfunded pension promise. We already have a very large unfunded basic state pension, which will represent a rising share of national income even with these reforms. If we had added a massive unfunded SERPS to that, those promises would not have been kept. It is nice to think they would have been, but they would not. Future generations of working taxpayers would have had to pay so much tax to meet all those unfunded promises that the system would not have survived.

What we are doing in this Bill is being responsible for the long term. This system will cost more as a share of GDP than we spend now—significantly more—but the rate of growth will be slower. Crucially, given the long-term health, social and pension costs in the decades to come, a Government who are acting now—taking difficult decisions about things such as the state pension age, but giving people time to plan—are doing the right thing for the long term.

On the private pension side of things, automatic enrolment has started incredibly well. For example, McDonald’s—just one employer—has found that the opt-out rate among some of its low-paid employees is as low as 3%. From memory, that means that 10,000 lowly paid employees at McDonald’s are now in pensions, with fewer than three in 100 opting out. That is a real achievement. One of the reasons for that is the communications work we have done—the “I’m in” adverts that we see on the tube, on television and so on.

Communications was a key issue. We absolutely have to communicate this change effectively. We are doing fieldwork over the summer on how best to communicate it and to whom. We are working with partners such as Age UK, the Money Advice Service and the Pensions Advisory Service. The one constraint we have is that we cannot presume exactly what the scheme will look like, because the House will consider it. We cannot write to people now telling them what will happen, because it might not happen—it might be changed by the House. That is a frustration for us, but as soon as this is determined and settled, we will be out there.

I have long looked forward to the moment when I can say with pleasure, along with my right hon. Friend the Secretary of State, that I commend this Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Pensions Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7))

That the following provisions shall apply to the Pensions Bill:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 11 July 2013.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

(7) Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Mr Syms.)

Question agreed to.

Pensions Bill (Money)

Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Pensions Bill, it is expedient to authorise the payment out of money provided by Parliament of:

(1) any expenditure incurred under or by virtue of the Act by the Secretary of State; and

(2) any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Mr Syms.)

Question agreed to.

Pensions Bill (Ways and Means)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Pensions Bill, it is expedient to authorise:

(1) the imposition of charges to income tax in respect of benefits payable under or by virtue of the Act;

(2) the levying of charges under the Pension Schemes Act 1993 for the purpose of meeting expenditure of the Secretary of State under or by virtue of the Act;

(3) the imposition of levies under or by virtue of the Pensions Act 2004 in respect of past periods;

(4) the imposition of levies under or by virtue of the Companies (Audit, Investigations and Community Enterprise) Act 2004 towards the expenses of grant-aided bodies concerned with preparing guidance for pensions illustrations; and

(5) the payment of sums into the Consolidated Fund.— (Mr Syms.)

Question agreed to.

Child Maintenance

Steve Webb Excerpts

Monday 20th May 2013 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

On 19 July 2012, the Government published “Supporting separated families; securing children’s futures” (Cm 8399), a public consultation on the draft Child Support Fees Regulations 2013 and the draft Child Support (Ending Liability in Existing Cases and Transition to New Calculation Rules) Regulations 2013.

This statement summarises the changes the Government intend to make in response to the consultation. We will publish a full response later this year.

As previously outlined, once the 2012 scheme has been opened to all applicants and has been shown to be working well, the Government intend to begin a gradual process of ending liabilities on cases in the previous Child Support Agency schemes. Parents in these “CSA” schemes will be invited to consider making their own family-based arrangements for maintenance or to apply to the new child maintenance service, which operates the 2012 scheme.

The Government will also begin charging application, collection and enforcement fees in the 2012 scheme. We have listened to concerns that the proposed 7% parent with care collection fee is too high a figure and therefore we will be reducing the proposed fee to 4%. The proposed fee for non-resident parents will remain at 20% calculated on top of the maintenance calculation.

In addition, we will extend the list of organisations to which an incident of domestic violence and abuse may be reported in order to qualify for the exemption from the application fee to include local authorities, legal professionals and specialist support organisations.

Separately, we have reconsidered our position on the flat rate of maintenance and have decided to set the 2012 scheme flat rate at £7 rather than £10 as previously proposed.

We intend to carefully manage the process of ending liabilities on cases in the CSA schemes so as to minimise the risk of disruption to child maintenance, particularly where maintenance is flowing as a result of enforcement action, such as deduction from earnings orders. We aim to do this in different ways.

First, we will change the proposed order in which liability is ended on CSA cases, starting with those CSA cases where a nil liability has been calculated, and therefore there is no possibility of payment disruption. We expect around 50,000 previously nil-assessed cases to be positively assessed in the 2012 scheme, resulting in maintenance flowing to these children for the first time; we will then end liability on cases that are not currently compliant, again because there is no current payment arrangement to disrupt; followed by any cases that are compliant but not subject to enforcement action, starting with those cases managed clerically. Finally, we will end liability on CSA cases that are in legal enforcement—and where money is flowing—or where money is only flowing as a result of an enforced method of payment. We anticipate this process of ending liability in CSA scheme cases to take approximately three years from start to finish.

Children living in lone parent families tend to be at greater risk of falling below low-income thresholds. By prioritising those cases where no maintenance is flowing, we aim to maximise the contribution of the statutory scheme to the welfare of these children.

Second, we will take a firmer line on which non-resident parents will be given the choice of paying the parent with care directly. We will offer a “compliance opportunity” to those non-resident parents who are subject to enforced methods of payment, such as deduction from earnings orders. We will write to non-resident parents nine months before their CSA maintenance liabilities are due to end, offering them the opportunity to prove their compliance voluntarily by paying via an unenforced method of payment such as direct debit for the final six months of their CSA liability.

Those non-resident parents who accept the invitation and then comply would have access to the “direct pay” option and thereby avoid the collection fee. Non-resident parents who refuse or fail this invitation will, if a case is opened on the 2012 scheme, be placed on the same enforcement method that they were subject to in the CSA schemes, thereby minimising the potential for payment disruption.

Finally, although this statement concerns changes to the statutory scheme, our reforms go wider than this. Our starting point is that children tend to do better when they have a positive relationship with both parents, so we are supporting both parents to play an active and positive role in the life of their child through the help and support for separated families (HSSF) programme. As part of this, we have launched the sorting out separation web app; an HSSF mark; the HSSF telephony network; and an innovation fund to test and evaluate new interventions to help separated parents work together.

Taken overall, these reforms are an important part of the Government’s wider social justice strategy, strengthening the support we provide to families and promoting the welfare of their children.